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Barbara Yaffe: B.C.’s Chamber of Commerce looking for new alternative to PST

Chamber is calling for a public discussion on adopting a value-added tax to replace the provincial sales tax

Backers of a value added tax want to avoid the kerfuffle ignited by the HST. Here, protesters in Vancouver lined the streets to fight the unpopular harmonized sales tax in August 2008.

Photograph by: Ian Smith
, PNG

VANCOUVER — B.C.’s chamber of commerce is calling for broad-based public discussion on adopting a value-added tax to replace the provincial sales tax.

The Clark government reinstated the PST/GST system last April, after public opposition forced it to scrap the HST.

“We are calling for broad public dialogues to explore and build consensus around moving B.C. toward a better sales tax system than the PST,” says John Winter, the chamber’s president and CEO.

He notes 45.2 per cent of British Columbians approved the HST in a 2011 referendum.

“Our pitch will be for a value-added tax.”

Winter says the reinstated seven-per-cent PST “telegraphs to entrepreneurs and business owners: ‘Don’t start your business here and don’t invest in new technologies ... B.C. doesn’t need top performers and jobs; try Alberta or Ontario’.”

He’s right. Since last spring, B.C. has been at a competitive disadvantage with every province except Manitoba and Saskatchewan — the only other jurisdictions with PST.

Provinces without PST, like Alberta, or those with HST, are more competitive because business inputs in those provinces escape sales tax, or their sales tax payments are recoverable.

A VAT in B.C. would achieve the same effect.

VATs are widely deployed globally, raising significant revenue in Europe, where Scandinavian countries impose VATs as high as 25 per cent. A VAT in the U.K. is 20 per cent.

The chamber is not arguing for a net increase in B.C. sales tax, but rather for a VAT-like scheme that would avoid taxing business investments.

The B.C. branch of the Canadian Federation of Independent Business has also expressed displeasure with the PST’s return.

Last month, it called for a $500-million-a-year tax credit to reimburse B.C. businesses for PST paid on investment inputs.

While most British Columbians may think they have heard the last of the sales tax debate, the provincial Liberals recognize the HST’s demise has left B.C. with a competitiveness problem.

Finance Minister Mike de Jong has been assigned by the premier to study the matter.

“The cost of capital investment has gone up dramatically with the return to the PST,” says Greg D’Avignon, President and Chief Executive Officer of B.C.’s business council.

D’Avignon notes that the PST’s return also entails $200 million worth of annual compliance costs for B.C. business, a further drag on productivity.

The latest available figures show B.C. ranks sixth in the country on output per-hour worked, and is “a little more than 10 per cent below the national average,” according to Jock Finlayson, Executive Vice President and Chief Policy Officer of the Business Council of B.C.

Alarmingly, the province is as much as 27-per-cent less productive than neighbouring Alberta, according to 2010 statistics released by the now-defunct B.C. Progress Board.

Of course, the PST is not B.C.’s only problem on this front.

Other factors driving down productivity involve a large immigrant population that is often underemployed; under-educated aboriginal people; a bounty of retirees; a dearth of big white-collar enterprises; and a preponderance of one- or two-person businesses.

Intriguingly, 55 per cent of B.C. businesses are small and self-employed. Companies with more than 50 workers comprise just 1.6 per cent of B.C.’s business sector.

Winter says the chamber is not trying to resurrect an HST debate, which he calls “a non-starter” in this province.

“What we are proposing is a way to leave our HST angst behind and move B.C. forward into tax dialogues.

“By not taxing business inputs, a VAT would allow B.C. to grow its prosperity by encouraging entrepreneurs, innovators and job creators.”

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